We're already there. We have two z9BC's with a CP each for z/OS and 2 IFL's each. We had two z/890s with only IFL each and we have production linux servers on one vm system on one frame and a test system on the other. Yes to what I believe management wants to do here is run HATS for 3270 screens.
If all they want is 3270 screens, take a close look at h3270.sourceforge.net. Runs nicely on Linux for Z, and no per-CPU charge at all.